ocean freight

Trade Winds bimonthly update volume 52

Mittal shutdown postponed; ArcelorMittal has announced that their planned shutdown at the Newcastle Furnace has been delayed till the end of March.

The announcement comes after the mill decided to build up steel supplies to carry the industry over the three months that it will be in care and maintenance.

There is the rising concern that South Africa will once again face a shortage of steel at the beginning of the second quarter going into Q3 due to Mittal’s shutdown as well as price increases to go along with the shortage.

Please be mindful of the shutdown and plan accordingly.

Global steel prices expected to remain elevated in 2022, players within the steel sector are becoming increasingly cautious in their purchasing requirements. The forward view on global prices is, gradually, turning more negative, particularly for coil products. The record high values reached towards the end of 2021 took many by surprise.

The peak of the price highs occurred at differing points in each region. European prices peaked at their highest level in June of 2021, while those in North America peaked in September as Asian prices levelled off.

The outlook for the start of 2022 is clouded again by Covid-19 sweeping across the globe. The ominous Omicron variant perhaps slowed the recovery in the steel market.

Prices are expected to find support above historical averages, due to increased mill input expenditure and moves to decarbonise the industry. The economic outlook for 2022 is also relatively strong. This is despite downside risks associated with new Covid variants and the expected tightening of monetary and fiscal policy in many countries.

Supply chain shortages are still disrupting the global steel market and are preventing a strong recovery in 2022. Due to the backlogged steel orders, the demand will remain high throughout the year. 

Because of the demand for the limited inventory available, steel prices will continue to go up in 2022. The U.S. steel industry is currently valued at $180 billion and began to boom in 2020 thanks to the disruptions caused by COVID-19. 

Increased business and consumer spending habits have driven up the demand for steel-bearing products, which are needed for everything from vehicles to food cans. Buyers in some instances are willing to pay more for these products and will continue to pay increased prices throughout 2022.

ATDF, again denies protest, The Port of Richards Bay was the scene of a peaceful, albeit illegal, protest against the employment of undocumented foreign truck drivers on Thursday morning as protesters pulled over several truck drivers before the police intervened.

Upon arrival at the scene, SAPS spoke to a person who was identified as the leader of ATDF on site however, the secretary for the All Truck Drivers’ Forum, Sifiso Nyathi, said the organisation had nothing to do with the protest and that it appeared that unemployed people were using the name, although they had no affiliation to the forum.

Nyathi said the ATDF would oppose the hiring of illegal immigrants via formal, legal channels.  Forums have been set up to engage with all relevant parties and government authorities and hopefully it will result in a workable policy that allows the industry to move forward in a positive and safe way.

Airfreight on a tricky path, spike in demand, soaring rates, and a tricky balance between certain markets remaining closed to curb Covid and others reopening to global trade, necessitate fine footwork from the airfreight sector.

The current situation of high demand and even higher rates was expected to last for the duration of the 1st quarter, before tapering off in Q2.

At least that’s what Aero Africa is hoping for, that there’s respite for shippers somewhere in the near future.

Until then, the struggle to find space and allocation for clients in a confined market continued, especially out of China.

Snags on the ocean side are fuelling an overflow of critical orders to air, sustaining demand, but capacity into Africa and its important sub-Saharan transhipment hub of South Africa remained a problem.

South Africa’s block space agreement out of China is on hold because the carriers are on hold, China cannot commit to freighters in South Africa because they are going into the US where the yield is better and as a result, options out of China have become few and far between, with agents fighting for space that is often elsewhere allocated because of market dynamics which is attributed to the strength of the dollar and the primacy of American imports to name a few.

Ocean freight costs expected to remain high throughout 2022, Shipping rates are expected to stay elevated well into 2022, setting up another year of booming profits for global cargo carriers.

The spot rate for a 40-foot container to the US from Asia peaked at just over US$20,000 last year up from less than US$2,000 a few years ago and was recently hovering near US$14,000.

Tight container capacity and port congestion also mean that longer-term rates set in contracts between carriers and shippers are running at around 200% higher than a year ago, which signals that elevated prices are here to stay for the foreseeable future.

Larger customers like retail or tech giants have the power to negotiate better terms in those deals or absorb the added expenses whereas the smaller importers and exporters that rely on carriers to haul everything from electronics and apparel to grains and chemicals, cannot easily pass those costs along or weather long periods of stretched cash flows.

Regulators from the US, the EU and China met in September and determined there was so far no evidence of anti-competitive behaviour in container shipping. Governments are on high alert as global supply chains are being pushed to the breaking point.

The US Federal Maritime Commission says it has increased monitoring of carrier alliances, to better track trends and spot potential illegal behaviour, such as artificially limiting supply or not competing on prices.

Zambia to continue with plans to sell KCM, Zambia’s state-appointed liquidator who is managing the affairs of KCM said he would proceed with the dismantling of the company and the sale of its assets.

This was after the Lusaka Court of Appeal earlier this month declined to discharge the liquidator, Milingo Lungu, despite ruling earlier that he should arbitrate a dispute with KCM’s majority shareholder, Vedanta Resources.

ZCCM Investment Holdings, a 20.6% stake holder in KCM, applied to put the company into provisional liquidation in 2019. Vedanta argued the step was unlawful as there were conditions in their shareholders’ agreement allowing for dispute resolution.

ZCCM said Vedanta had failed to invest in KCM’s assets and had not paid dividends as previously promised.

Despite being asked to enter into arbitration proceedings with Vedanta, Lungu said that he would divide KCM into halves, effective January 31, and then embark on an asset disposal programme.

Zimplats allowed to set up solar plants. The Zimbabwe Energy Regulatory Authority announced on Friday that it had granted Zimplats a licence to construct, own, operate and maintain a 105 MW solar power plant at Ngezi Mine.

A similar notice was also published but this time for the generation of an 80 MW solar power plant at Zimplats’ Selous Mine in Chegutu.

Zimplats says setting up the two power plants will cost the company as much as $201 million.

Zimplats is not the only miner that has turned to solar power as gold miner Caledonia Mining, which runs Blanket Mine in Zimbabwe is constructing a 12 MW solar plant which is expected to be operational this year and will exclusively supply Blanket with approximately 27% of its daily electricity usage. 

Copper prices on the rise, the copper price rose on Wednesday, supported by expectations of further policy easing in China.

March delivery contracts were exchanging hands for $9,856/tonne on the Comex market in New York, up 2.3% compared to Tuesday’s closing.

The most-traded March copper contract on the Shanghai Futures Exchange was steady at $11,026.46/tonne.

China, the world’s biggest buyer of metals, has been stuck in a property market slump, credit stress and repeated virus outbreaks. In response, the central bank this week cut its policy interest rate for the first time in almost two years, signalling the beginning of an easing cycle. 

China’s copper exports rose to an annual record of 932,451 tonnes in 2021, according to customs data.

Gold also rose to its highest in two months this past Wednesday.

Fears that insurgents planning more attacks in Cabo Delgado, The SADC has warned that insurgents are regrouping for more coordinated attacks.

While SADC has noted considerable gains in Cabo Delgado, there are genuine fears that insurgents have withdrawn to regroup and are planning rejuvenated attacks. 

“The insurgency is not yet neutralised. The violent extremists are regrouping, launching attacks from several parts of Cabo Delgado and they are also expanding to neighbouring province Niassa where they have launched significant attacks,” said Professor Adriano Nuvunga – the Director of the Centre for Democracy and Development.

SADC sent in its Standby force into Mozambique’s gas-oil rich Cabo Delgado in July last year, a month after Rwanda sent in troops.

At the onset of the SADC Mission in Mozambique, Nuvunga said the insurgents were disbanding. However, six months later, they had changed their strategy.

At the beginning of the deployment, the country saw violent extremists disbanding. Now they have seen them regroup and move in terms of recruitment.

On December 15 last year, Islamic extremists in Nova Zambezia, Macomia district, beheaded a pastor and instructed his wife to take his head to the police with a message: “While you [government forces] are walking on tarred roads, real men [insurgents] are in the woods.”

As a show of power, the insurgents operating from the bush ambushed SAMIM forces in the east of Chai in the northern Macomia district on the night of December 19, resulting in the death of a South African soldier.

Intel also suggests that the insurgents have support within communities they operate, with some civilians assisting them in transporting arms.

Since the insurgency began in 2017, there have been 1,111 cases of political violence with 3,627 reported fatalities during these attacks and 1,587 reported fatalities from violence targeting civilians.

“Great things are done by a series of small things brought together.”

Trade Winds bimonthly update volume 51

A very warm welcome back to all our valued customers and our best wishes for a positive and successful year ahead.

As we ease into January, herewith a brief update on latest news. We will resume with our full and more comprehensive Tradewinds edition later in the month.

Steel increases continue! Once again, the industry was notified of prices increases effective 1 January 2022.

All three major mills in South Africa have increased their pricing on products such as mining bar, smooth round bar, deformed bar, mesh bar and mill rods to name a few in the region of R700 – R850/Ton.

It seems the trend of import parity pricing is set to continue.

The PVC sector has also announced an increase of 8-10% on all products for the month of January, this comes after back-to-back increases totalling a whopping 63% increase on raw product throughout 2021 as well as force majeure announcements amongst global producers last year.

Truck drivers being harassed by ATDF again, eThekwini Metro police dispersed a crowd of illegal protesters who were stopping trucks near the old Durban airport site on Wednesday demanding to see truck drivers’ permits to check whether they are foreign employees or locals.

A post circulated on WhatsApp groups on Wednesday alleged that the protesters were members of the All Truck Drivers’ Forum (ATDF).

However, ATDF denied that it had been behind the protest action. 

Road Freight Association has requested that ATDF supply details of non-compliant companies, which it had earlier alleged were flouting labour and tax legislation in the employment of foreign nationals, so that action could be taken against them.

Container shipment delivery times double, Data of container timelines measured by a San Francisco brokerage over the festive season period does not bode well for ongoing delays experienced along the transport value chain.

According to the latest information released, containers going via east trade lanes are taking twice as long as they did in 2019.

Shipments which would take roughly 45-50 days from the States to reach its destination out east are now taking around 110 days to complete the journey, the longest it has ever taken for a shipment from the States to reach Asia.

Moreover it is also noted that it now takes roughly 108 days for container in the Far East to reach its import destination in Europe, pre-pandemic trips would take 55 to 60 days on average.

Container availability is severely impacted across the globe because of double-time holdups on certain trade lines. According to the maritime consultancy’s own data, holdups rose by 9% last year, there are fears that freight rates will increase even more.

Freight rates are expected to climb as Lunar New Year approaches and any additional slow down due to COVID will likely exacerbate the congestion and backlog, causing higher container rates. Container rates quoted for January 2022:

  • Global freight rates decreased 5% to$8,917 which is still 140% higher than this time last year
  • Asia – US West Coast rates decreased 14% to $12,524 which is still 218% higher than this time last year
  • Asia – US East Coast container rates stayed basically the same as the last week of 2021 at $16,495, which is 232% more expensive than last year
  • Asia – North Europe container shipping rates also remained level, decreasing 2% to $14,240, nearly double last year’s rate
  • North Europe – US East Coast rates decreased 10% to $6,230, however this is nearly 240% higher than December 2021

Airfreight rates out of China on the down for now, airfreight rates out of China to leading international destinations have fallen 30% since their mid-December peak of $15.13 per kilogram, rates to the United States were at an all-time high but has since sharply decreased to $10.68.

China-Europe rates, in comparison, are down 17% to $7.34 p/kg since reaching a festive season peak of $8.82 by the end of December.

With indications that port-side constraints and associated containerisation shortfalls will continue to put pressure on efficient flows, expectations are that a likely airfreight rate rise is again on the cards.

“Life is like a coin. You can spend it any way you wish, but you only spend it once.”

Trade Winds bimonthly update volume 50

Hello and welcome to our 50th edition of Trade Winds, before we continue, we would just like to thank each and everyone one of our valued customers for being a part of this journey so far and for your continued support throughout the year.

Are steel price increases a thing of the past? Steel prices surged during the post covid-19 recovery as supply struggled to keep up with demand. Prices for some products and markets hit all time highs in 2021 and detached from costs. However, the steel price cycle peak may be behind us.

Long products and rod saw huge increases in 2021, levels that were not even seen during the Global financial crisis back in 2008. Flat products had the biggest increases, making the increase on long products seem okay in comparison.

The surge in high prices experienced in 2021 are seen as a once in a decade phenomenon and this trend is not expected to be seen again within the foreseeable future, however with the global carbon steel prices seeming to be tapering down, South Africa is yet to follow suite.

There remain caution however in some circles since inflation in developed countries continues to rise which will further negatively impact global pricing particularly with regards to labour and logistics.  This is already evident in imports from the U.S.A.

Border updates, there were some reports of delays at Beitbridge last week however the border is flowing once again with no issues. No other issues have been reported amongst the other border posts.   The only issue is the time of year and  increased cargo movement resulting in longer waiting times for trucks.

It is really important to plan ahead!

N3 Truck driver protesters arrested, A week ago, truck drivers blocked off Van Reenen’s Pass, a busy North-South corridor between Durban port and Southern Africa. The protest started in the early hours of Friday morning and lasted till the evening, causing huge delays.

Twelve truck drivers were expected to appear in the Ladysmith Magistrate’s Court after they were arrested last week Friday for using their rigs to obstruct traffic.

The blockade was in protest of the presence of foreign national drivers working in South Africa’s Road freight sector.

Wide condemnation has since been expressed over the impact of Friday’s blockade, with Durban Chamber of Commerce CEO Phalesa Phili saying losses of about R800 million a day are lost when the country’s most important supply artery is affected in this manner.

Economists have expressed how this protest was bad for South Africa’s image as a key partner for intra-African trade, especially in light of the African Continental Free Trade Area.

New covid variant poses threat to eased freight rates, The impact of vaccination rates will play a significant role in projected global economic growth in 2022, with predictions that it will slow to 4.3% from 5.7% this year on the back of a downward trend in the post-pandemic rebound.

Freight shipping rates have already pulled back somewhat from their September high, but that said, the new Omicron variant poses a risk in this regard. If it leads to widespread border closures and tougher domestic restrictions, this could spur renewed demand for goods over services.

Stricter lockdowns could also see a repeat of port disruptions, with the attendant impact on cargo flows that has been evident throughout the pandemic.

Ocean freight reliability on the rise, with schedule reliability edging up slightly but still well below acceptable norms, some analysts have said that shippers’ price is sometimes secondary to the predictability of getting product to market.

It is also noted that the new strain has caused a stir with some countries now advising that any vessels arriving at their respective ports are to anticipate a quarantine window period, thus causing further impact on vessel schedules globally.

Further on, South African ports are currently experiencing delays which has been caused by severe weather, terminal congestion and berthing delays ranges from 3-5 days, with a further delay of 5 days expected in Cape Town and an additional 2-day delay in Durban. 

Major impact remains on import delivery, clients are now faced with huge demurrage charges as transport booking slots are still impacted by the terminal congestions.

Africa, the leaders in air cargo growth,  there is some bad news with airfreight due to cancelled PAX flights, the capacity remains constrained in and out of South Africa as countries tighten travel rules over the Omicron variant, belly cargo capacity may fall again in the coming weeks. 

Iron ore price rockets, Iron ore price surged on Tuesday after customs data showed China’s iron ore imports rose 14.6% in November from a month earlier to hit their highest since July 2020.

The world’s biggest consumer of iron ore brought in 104.96 million tonnes last month, up from October’s imports of 91.61 million and were also up 6.9% from November 2020.

Bureau Veritas slowly recovering from Cyberattack, The French classification company’s internet services remain deactivated after it detected an attempted cyber-security breach two weeks back, forcing BV to take its data and servers offline.

As of last week, more than 80% of operations were running at a normal level and some regions still have IT systems running at a reduced rate.

The company expects to recover most delayed activities in a short period of time and are evaluating any potential impact.

Currently the company is issuing inspections and certificates manually via email, there is a backlog as BV has lost three weeks of work however slowly services are returning.

The festive season is upon us!

We would like to thank our valued customers for all your support throughout this challenging year.  We hope we have served you well and whatever 2022 brings, we will continue to strive for service excellence, reliability and competitively priced product for mutual success and stronger partnerships.

Thank you!!

We wish you and your families a happy and safe festive period!

“You are the artist of your own life, don’t hand the paintbrush to anyone else”

Please note that Trade Winds will be taking a break until later in January.

Trade Winds bimonthly update volume 49

Expected steel price increase, A small transport fee has been added to the price of steel coming from the mills to combat the ever-increasing price of fuel in the region of 2.5% with an expected steel increase on the horizon as well. As of now there is no formal notice from the mills, but the sector is bracing itself for the inevitable as the industry continues to battle with fuel and labour hikes as well as electricity cuts whether the increase is for December or January remains to be seen.

HDPE prices will also increase at the beginning of next year in the region of 6.5% on all HDPE products.

Border updates, for the first time, we can report no issues at any of our surrounding borders, seems that delays at Beitbridge really are a thing of the past.

New covid variant causing havoc in SA, the newly discovered covid variant B.1.1.529 has sent shockwaves throughout South Africa and the world alike, as countries like the UK, Germany and Italy have banned flights from South Africa as of midday today with the European Union considering banning all flights from South Africa as well. The UK has also banned flights from Namibia, Lesotho, Botswana, Eswatini and Zimbabwe.

Israel also announced it will ban its citizens from travelling to southern Africa, covering the same six countries as well as Mozambique and barring the entry of foreign travellers from the region.

The rand has taken a huge knock as the country has been placed on the UK’s red list further weakening an already struggling economy.

Fuel price driving inflation up, South Africa’s transport sector was the largest contributor to inflation in the country, the Bureau for Economic Research says in its latest weekly assessment.

With the headline Consumer Price Index measured at 5% year-on-year in October, it marks the sixth consecutive month that inflation has been above 4.5%, the Bureau says.

This is also the midpoint of the Reserve Bank’s target, hence last week’s 25 basis point increase in the repo rate.

The largest contributor to the annual inflation figure was transport, which climbed 10.9% year-on-year, adding 1.5% pts. This was mainly attributable to fuel prices which increased by 23.1% year-on-year, up from 19.9% year-on-year in September.

Local mines could invest R60 billion to combat load shedding, South African mining companies are poised to spend 60 billion rand ($3.8 billion) on renewable energy projects in hope to help ease the country’s electricity supply crisis.

The industry is planning 3,900 megawatts of solar, wind and battery energy projects, which could supplement supplies from state-owned utility Eskom Holdings SOC Ltd.

Earlier this year, President Cyril Ramaphosa raised the limit on companies producing power without a license to 100 megawatts from 1 megawatt, clearing the way for miners to start generating their own electricity.

South Africa experienced record outages this year, stifling an economic rebound from the pandemic in the continent’s most industrialized economy.

The industry, including the world’s top platinum and rhodium producers, is the country’s biggest user of electricity.

Sibanye Stillwater plans on adding 475 megawatts of solar and wind-power capacity, whilst Anglo American Platinum Ltd aims to start generating around 100 megawatts of renewable power at its Mogalakwena mine by the end of 2023.

Impala Platinum Holdings Ltd. is weighing options to have all its mines in South Africa and Zimbabwe use solar power.

SA Port costs too high considering turnaround time, South Africa’s private sector freight industry, for the most part, believes that the country’s port costs are too high.

Especially at congested ports like Durban.

Constant equipment failure, labour issues, and efficiency headaches contribute to widely shared criticism that the country’s ports are not being run as they should.

Looking at where the World Bank rated SA ports during a performance index released in May.

Not only were South Africa’s ports outperformed by the likes of the Port of Djibouti, but it also served to stoke fears that nearby ports like Walvis Bay, Maputo, Beira and even Dar es Salaam, were sniffing at a slice of the country’s ports’ pie.

Transnet National Ports Authority doesn’t seem to be sharing the view that the ports aren’t run properly.

In a media briefing, Transnet said that they were so efficient that the price was almost irrelevant, suggesting that they were worth the cost.

What exporters and importers pay to ship through South Africa’s ports, it said, translated into savings elsewhere along the supply chain.

Brace yourselves, Airfreight rates to rise further, Airports are under the whip as demand continues to exceed capacity and Covid-safe work practices and apparent labour shortages continue to place immense pressure on UK, EU, US and global air freight hubs, creating congestion from Heathrow to Azerbaijan.

According to UK-based logistics provider Metro Shipping which points out that while there are different situations at different airports, the demand for air cargo is exceptionally high. In addition, ground-handling operations are proving to be consistently ineffective at servicing the upturn in freighters, and passenger freighters, with problems at Heathrow, Amsterdam, Brussels and Frankfurt in Europe alone.

Metro believes that despite the congestion, the already exceptionally high airfreight prices will climb further as supply chain disruptions force ocean freight shippers to switch to airfreight.

The issue is however endemic as US, European and Asian hubs are experiencing the same problems. Metro believes it’s unlikely to improve any time soon as ocean freight is continuing to look at airfreight as a logistic solution.

Predictions are that the air cargo boom will continue well into next year, and possibly 2023, as it may take that amount of time for the passenger schedule to return to pre-Covid levels.

Zim economy on the right path, the Zimbabwean government has broken the shackles the economy has been in and is on the right path to start realising meaningful returns despite economic headwinds that have hindered its progress.

Mr. Holtzman, Chairman of CBZ Holdings, Zimbabwe’s biggest bank, expects a full turnaround by the end of this year after a challenging financial year.

The growth prospects for Zimbabwe come at a time where the IMF has upgraded its estimate for economic growth this year to 6 percent from 5.1 percent on the back of increased activity within the manufacturing and construction sectors.

Zimbabwe currently possesses potential which if exploited correctly can turn the country’s fortune around with agriculture being singled out as one sector which has gained a considerable amount of traction as farmers are now drifting towards high-value crops for the export market.

Excluding the agriculture sector, Zimbabwe currently has huge nickel and lithium deposits, minerals whose importance is increasing given the global trends in technology where economies are moving towards the use of electrical cars and cleaner energy.

DRC looking to develop domestic battery manufacturing, DRC mines the majority of the world’s cobalt, an ingredient in lithium-ion batteries, and is Africa’s leading producer of copper. Demand for the minerals is rising to power electric vehicles and electronic devices.

However, on the flipside DRC, which ranks among the world’s least developed countries, exports its minerals for only a fraction of the final cost of the batteries, which are mostly manufactured in Asia.

Prime Minister of DRC, Sama Lukonde announced a series of measures aimed at speeding the development of a battery manufacturing industry which includes the creation of a “Battery Council” with the aim of driving the government’s policy to develop a regional value chain around the electric battery industry.

Minister Lukonde did not provide specific details about how long these initiatives would take to set up or how they would be funded, although several development banks, including the African Development Bank, has signed a pledge to help develop Congo’s battery industry

President Hakainde Hichilema of neighbouring Zambia, Africa’s second-largest copper producer has said that his country is ready to work with Congo and others in the region to develop Africa’s industrial capacity.

Bureau Veritas hit with cyberattack, Bureau Veritas (BV), detected an attempted cyber-security breach last week, forcing the company to take its data and servers offline.

Earlier this week it was reported that BV had decided to immediately institute the necessary preventative measures.

The attack comes after BV recently warned that it had become aware of increased risk to global supply chain interests, especially against the backdrop of ongoing pandemic challenges.

The disruption caused to supply chains the world over by the virus, risk assessors say, is playing into the hands of cyberattackers wanting to exploit existing conditions of instability.

Please note all BV inspections have been halted for now and we will continue to monitor the situation.

World’s first electric container ship sets sail, The world’s first electric and self-propelled container ship, Yara Birkeland, has set sail.

The self-propelled container ship departed from Horten in Norway on the morning of November 18 and arrived in Oslo in the early evening.

 A joint venture between chemical production firm Yara and maritime technology company Kongsberg, the vessel is expected to cut 1 000 tonnes of CO2 and replace 40 000 trips by diesel-powered trucks a year.

It will be used to transport fertiliser between Porsgrunn and Brevik.

Plans for the construction of the vessel were announced back in 2017.

Its launch marks the start of a two-year testing period of the technology that will make the ship self-propelled, and finally certified as an autonomous, all-electric container ship.

The 80-metre-long vessel has capacity for 120 TEUs and the cost of construction is estimated at $25 million.

In parallel with the project, Yara has initiated the development of green ammonia as an emission-free fuel for shipping, through its newly launched Yara Clean Ammonia.

Yara, the world’s largest producer of fertilisers, relies on ammonia to make fertiliser, and to help feed an ever-growing population. At the same time, current ammonia production represents 2% of the world’s fossil energy consumption. This corresponds with about 1.2% of the world’s total greenhouse gas emissions.

“Nothing in the world is ever completely wrong. Even a stopped clock is right twice a day”